Delio CEO Sentenced to 15 Years Over $49M Crypto Fraud

A South Korean court sentenced Delio CEO Jeong Sang-ho to 15 years in prison Thursday after finding him guilty of defrauding customers of roughly 70 billion won ($49 million) through the collapsed crypto deposit platform.

The Seoul Southern District Court also ordered Jeong detained, citing a risk of flight. The sentence fell five years short of the 20-year term sought by prosecutors, according to Digital Asset, which reported from the proceedings.

The ruling was narrower than the prosecution’s original case. Jeong had been accused of fraud involving about 250 billion won in crypto belonging to roughly 2,800 customers, but the court excluded evidence obtained during a search of Delio’s server-hosting provider.

Judges found prosecutors had failed to guarantee Delio’s right to participate in the search and had not properly provided an inventory of seized material. That rendered the related database evidence inadmissible and resulted in an acquittal on the main fraud allegations.

Prosecutors had prepared for that possibility by adding an alternative set of charges based partly on Delio’s bankruptcy records. The court convicted Jeong on most of those allegations, covering about 1,000 customers and 70 billion won. Charges relating to 41 additional customers were rejected for insufficient evidence.

Court points to undisclosed risks

The court found that Delio presented itself as capable of generating stable returns and returning deposited assets while failing to disclose mounting principal losses, unsecured lending and what judges described as a circular repayment structure.

Jeong was also convicted of improperly obtaining Delio’s virtual-asset service provider registration using inflated asset information submitted to financial authorities.

Delio suspended withdrawals on June 14, 2023, one day after Haru Invest froze deposits and withdrawals. Delio had exposure to Haru and subsequently entered bankruptcy proceedings.

In setting the sentence, the court cited the scale of customer losses and the difficulty of recovery, while also treating the collapse of FTX as an external factor that contributed to the events leading to Delio’s failure.